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The usefulness of extended input–output tables incorporating firm heterogeneity

Author

Listed:
  • Satoru Hagino

    (Senior Research Fellow, Economic and Social Research Institute, Cabinet Office (ESRI))

  • Jiyoung Kim

    (Okayama University)

Abstract

This study examines the usefulness of an extended input–output table (EIOT) incorporating the heterogeneity of Japanese firms based on differences in ratios of imported intermediate goods to total output. Using an EIOT, the vertical specialization indicator of Japan was calculated, which corresponds to the foreign value added included in exports. In this process, differences in intermediate input ratios were measured examining different types of firms using firm-level microdata from the Basic Survey of Japanese Business Structure and Activities. The results indicate that distinguishing between exporting and non-exporting firms is relevant for assembly industries such as electronics and automobiles, as widely discussed in the literature. In contrast, for primary materials industries, such as paper, chemical, and metal industries, other distinctions appear to be more relevant. For example, for the chemical industry, wherein firms tend to have large, integrated manufacturing plants, the differences in intermediate import ratios are largest when distinguishing large firms from small and medium firms. For paper and metal industries, which rely on foreign raw materials, the difference is largest when distinguishing between firms with and without foreign affiliates. By incorporating such heterogeneity, the vertical specification indicator increases by 70%; thus, the EIOT captures the foreign value added more comprehensively.

Suggested Citation

  • Satoru Hagino & Jiyoung Kim, 2021. "The usefulness of extended input–output tables incorporating firm heterogeneity," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-28, December.
  • Handle: RePEc:spr:jecstr:v:10:y:2021:i:1:d:10.1186_s40008-021-00255-3
    DOI: 10.1186/s40008-021-00255-3
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    References listed on IDEAS

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    1. ITO Koji & Ivan DESEATNICOV & FUKAO Kyoji, 2017. "Japanese Plants' Heterogeneity in Sales, Factor Inputs, and Participation in Global Value Chains," Discussion papers 17117, Research Institute of Economy, Trade and Industry (RIETI).
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    3. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    4. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Extended input–output table; Trade in value added; Incorporating firm heterogeneity; Vertical specialization;
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • F1 - International Economics - - Trade

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